The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

Of course, the plan was opposed — by Democrats, including Barney Frank:

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Remind me why we care what Barney Frank thinks again?

P.S. Another reminder. Who said this?

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market…If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie and Freddie pose to the housing market, the overall financial system, and the economy as a whole.

That’s John McCain from 2005, speaking in support of legislation to control Fannie and Freddie. See Karl from a few days ago for more.

Barack Obama was concerned as well — concerned, that is, to make sure he was collecting as much money as possible from Fannie and Freddie. He did well, too, becoming the third top recipient in the Senate of Fannie and Freddie contributions from 1989-2008. [UPDATE: Make that second top recipient.] (Karl pointed out related figures days ago.) That’s fast work, since he’s been a Senator for only 4 years.

UPDATE: Yes, I know Republicans controlled Congress during this time. But this election is between McCain, who tried to do something, and Obama, who took money from Fannie and Freddie. As Ed Morrissey noted in the post linked above, the 2005 legislation never made it out of committee — and “Chris Dodd, then the ranking member of the Banking Committee and now its chair, was in the middle of receiving preferential loan treatment from Countrywide Mortgage, one of the companies gaming the system in the credit crisis.”

If McCain neglects to hammer these points home over the next few weeks, he’s toast. Obama and his fawning multitudes among the MSM are trying furiously to suggest otherwise – don’t let them get away with it, Johnny Mac.

On May 24, 2001, Jim Jeffords left the Republican Party, with which he had always been affiliated, and announced his new status as an independent. Jeffords discussed this decision during his announcement that he was leaving the Republican party. “I will make this change and will caucus with the Democrats for organizational purposes once the conference report on the tax bill is sent to the president. I gave my word to the president that I would not intercept or try to intervene in the signing of that bill”. Jeffords decided to switch when the Senate Republicans had refused to fully fund the Individuals with Disabilities Education Act. [2]
The independent status of Jeffords changed the Senate composition from 50-50 (with a Republican Vice President, Dick Cheney, serving as President of the Senate to break tie votes) to 49 Republicans, 50 Democrats, and one independent. Jeffords promised to vote for Democratic control after being promised a committee chairmanship by Democratic Leader Tom Daschle. He then handed his chairmanship of the Health, Education, Labor, and Pensions Committee, which he had held since 1997, to Ted Kennedy (D-MA) and was given the chairmanship of the Senate Environment and Public Works Committee, which would have been occupied by ranking minority member Harry Reid. Jeffords held this committee chair until the Democrats lost control of the Senate in 2003 following Congressional elections in 2002.

Significant details must still be worked out before Congress can
approve a bill. Among the groups denouncing the proposal today were the
National Association of Home Builders and Congressional Democrats who
fear that tighter regulation of the companies could sharply reduce
their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing
any kind of financial crisis,” said Representative Barney Frank of
Massachusetts, the ranking Democrat on the Financial Services
Committee. ”The more people exaggerate these problems, the more
pressure there is on these companies, the less we will see in terms of
affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving
something from one agency to another and in the process weakening the
bargaining power of poorer families and their ability to get affordable
housing,” Mr. Watt said.

Yes, jpe, Democrats, with some Republican pussies, blocked the regulation. Do you know what a filibuster is ?

One might wonder why Dodd and Obama were #1 and #2 in funds bequeathed to them by Fannie and Freddie. What quid pro quo resulted? And why would
the junior senator from Ill. get such a disporportionate amount in a few short years? Will the media bother to query the Anointed One?

You’re trying to score political points. Some context, for your readers

Fannie and Freddie had about as much to with the “explosion of high-risk lending” as they could get away with. We are all fortunate that they couldn’t get away with all that much of it. It is a fact that their market share dropped like a brick in the early years of this century, except of course for years like 2003, when fixed rates dropped to cyclical lows, refis boomed, and GSE market share shot up again, only to plummet in the years following during the purchase boom.

But they didn’t like losing their market share, and they pushed the envelope on credit quality as far as they could inside the constraints of their charter: they got into “near prime” programs (Fannie’s “Expanded Approval,” Freddie’s “A Minus”) that, at the bottom tier, were hard to distinguish from regular old “subprime” except–again–that they were overwhelmingly fixed-rate “non-toxic” loan structures. They got into “documentation relief” in a big way through their automated underwriting systems, offering “low doc” loans that had a few key differences from the really wretched “stated” and “NINA” crap of the last several years, but occasionally the line between the two was rather thin. Again, though, whatever they bought in the low-doc world was overwhelmingly fixed rate (or at least longer-term hybrid amortizing ARMs), lower-LTV, and, of course, back in the day, of “conforming” loan balance, which kept the worst of the outright fraudulent loans out of the pile. Lots of people lied about their income (with or without collusion by their lender) in order to borrow $500,000 to buy an overpriced house in a bubble market. They weren’t borrowing $500,000 from the GSEs.

Furthermore, both GSEs were major culprits in the growth of the mega-lenders. Over the years they were struggling so hard to maintain market share, they were allowing themselves to experience huge concentration risks. As they catered more and more to their “major partners”–Countrywide, Wells Fargo, WaMu, the usual suspects–they helped sustain and worsen the “aggregator” model in which smaller lenders sold loans not to the GSEs but to CFC or WFC, who then sold the loans to the GSEs. In large measure this was a function of pricing: the aggregators got the best pricing from the GSEs–the lowest guarantee fees, the best execution options–making it more attractive for a number of reasons for small lenders to sell to the aggregators.

I am constantly reminded when reading Krugman that he was a financial advisor to Enron, and we know how that turned out (and we need to remind Mr. Krugman that we remember his association with them at every turn).
Let him wear the “mark of Cain”.

I think we can give Fannie and Freddie their due share of responsibility for the mess we’re in, while acknowledging that they were nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren’t the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box. But Krugman is right to focus on the fact that it was the regulatory and charter constraints of the GSEs that kept that box closed. In the schizoid reality of the GSEs, when they had their “shareholder-owned private company” hats on they did plenty of envelope-pushing. When they had their “affordable housing” hats on, they rationalized dubious theories of credit quality–like the fervent belief that low or no down payment can be fully offset by a pretty FICO score–to beef up their affordable housing goals, often at the expense not of the poor put-upon “private sector” but of FHA, whose traditional borrower pool they pretty thoroughly cherry-picked. Nonetheless, the immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of “innovation.” If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.

So the “schizoid” condition of Fannie and Freddie allowed it, but weren’t responsible? And this is a reason to pretend that McCain was wrong in his call for greater oversight?

readnek – Correct me if I’m wrong, isn’t that what you’re trying to do here.

I pointed out on another thread earlier today that the mortgage originators were looking for a best execution strategy, whether they were mortgage brokers or banks and whether that involved selling to the CSE’s or Wall St. conduits. The article you linked confirms what I said, but I don’t share other parts of its analysis or conclusions. The article also contradicts the lefty stance that deregulation was the cause of this crisis.

But that Paul Krugman is a winner. If you keep predicting a recession, one will eventually get here. He’s predicted nine of the last three by most recent count.

Why did so many smart people at so many top firms make dodgy investments? Why were there so many unknown unknowns, now at least becoming known unknowns? One explanation is the absence of warnings from the professionals whose job it is to identify risks at companies such as financial-services firms: the much-maligned research analysts. For decades, the large Wall Street brokerages had armies of analysts who, when they did their jobs right, asked the hard questions and issued tough reports that often alerted both company executives and public investors to market-moving issues.

There are now about half as many Wall Street analysts as in 2000. Former New York Attorney General Eliot Spitzer eviscerated the profession with $1.4 billion in settlements and a new mandate for how the industry would be structured, which made the analysts uneconomical. Some brokerages had mixed analysis with investment banking during the dot-com boom, but regulatory overkill undermined this source of informed analysis. Last year, Brad Hintz, who covers brokerages for Sanford C. Bernstein, told Barron’s, “Research analysts have gone the way of high-button shoes and buggy whips.”

Instead, the Ohio Republican who headed the House financial services committee until his retirement after mid-term elections last year, blames the mess on ideologues within the White House as well as Alan Greenspan, former chairman of the Federal Reserve.

The critics have forgotten that the House passed a GSE reform bill in 2005 that could well have prevented the current crisis, says Mr Oxley, now vice-chairman of Nasdaq.

He fumes about the criticism of his House colleagues. “All the handwringing and bedwetting is going on without remembering how the House stepped up on this,” he says. “What did we get from the White House? We got a one-finger salute.”

The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.

Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.

Adamant that the only solution to the problems posed by Fannie and Freddie was their privatisation, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.

“We missed a golden opportunity that would have avoided a lot of the problems we’re facing now, if we hadn’t had such a firm ideological position at the White House and the Treasury and the Fed,” Mr Oxley says.

When Hank Paulson joined the administration as Treasury secretary in 2006 he sent emissaries to Capitol Hill to explore the possibility of reaching a compromise, but to no avail.

Of course, the [2003] plan was opposed — by Democrats, including Barney Frank

The plan produced S.1656, authored by New Jersey Democrat Jon Corzine.

There were no co-sponsors.

S. 1656 mandates that the director review the adequacy of current risk-based capital standards and make recommendations to Congress for changes in statutory levels. The bill would authorize the director to modify the capital level if the current level were determined inadequate to ensure safety and soundness.

Mike – It’s easy. You get rooms full of people with no real world experience. Each of the people in the rooms have fancy degrees in math, business, etc. from high quality schools. They each believe they are the smartest people in the world and don’t hesitate to share that opinion with you. They believe they have exactly modelled the risks of the underlying mortgages they are sticking in the securities they are peddling. Nevermind that there is no good historical data on subprime mortgages, mortgages with the characteristics they are selling, documentation problems of the underlying loans, etc., etc. The masters of the universe have spoken!

The geeks have inherited the earth until they cost everyone too much money.

Mr Oxley’s screed has already been discredited on this site.
It is interesting that one of the many reforms suggested by knowledgeable observers is the scrapping of Sarbannes-Oxley, which has been a disaster to American business, but a watershed event for overseas financial markets in the IPO business.

“The geeks have inherited the earth until they cost everyone too much money.”

No not Geeks, accountants that figured out how to enrich themselves while in positions they should have never been able to attain.

Bean counters, NOT Geeks!

Bean counters, the same sort that have aided the importation of our jobs overseas, massive companies charging American consumers the same $20 fees while using 25 Cent labor. None of which care if lead is used in the toys your child will chew upon. Just numbers! Cheaper production equates to larger profits! TODAY!

See we all just need to get onto this “globalization” bandwagon, they make 25 cents an hour, you too will work for 25 cents an hour. Even thouth they pay 50 cents for fuel and you have to pay 4 bucks for the same. Come on, get “globalized” today!

As a nation, we should let them all fail! NOT bail out the banks, the ins companies or anybody else. The only time that actually worked was with Chrysler, but they had a real leader.

This time around, it’s but a total Bamboozle job on those that will have to end up paying!

Oh and the first that need to be broken, is the heads of any of these firms! ZERO compensation should be allowed for such, subprime, performance!

29 TC- I share your concerns. Dream on though. Barclays is buying Lehman and has set aside $2.5 billion for bonuses for Lehman NY staff. I guess we’ll be told that if we have doubts or complaints, own some of the company stock and vote at board meetings. Yeah, that’s the ticket. I’ve contributed way too much of my dough in the past to companies which went in the toilet with a series of really bad managements. Said managements always seem to do well feathering their own nests with options and golden parachutes. IMO the SEC oversight is at best a joke and at worst itself a criminal enterprise.
Speaking of shitty management, I’m wondering how much compensation Lord Magic Negro sucked in for managing that Annenberg Challenge Fund and how many friends of Obama made out also? Look at “benevolent” Marxists/socialists like the obama, Wright, Ayers, etc. and observe how well they’ve done financially, despite racist white Amerikka holding them down.

I’m always for less regulation. But I am aware of the view that there is a need for government oversight. I think we found this in the subprime lending crisis — that there are people that game the system and if not outright broke the law, they certainly engaged in unethical conduct which made this problem worse. So I do believe that there is role for oversight.

As far as a need for additional regulations are concerned, I think that depends on the legislative agenda and what the Congress does to some degree, but I am a fundamentally a deregulator. I’d like to see a lot of the unnecessary government regulations eliminated, not just a moratorium.

Kind of different than what the leftist liar threw out there before running away.

It is a very old and well-known trick: a politician counts the votes and proposes something he knows won’t pass, then trumpets his position at election time, and so we think he is a “good guy”. Remember the attempt to pass a balanced budget amendment? Looking back, we should have known that it was a charade. Now, I’m reminded by your update that they held the majority, and *still* didn’t pass what you claim “Republicans sought”! In this scenario, a politician claims to be for it, and you believe him. Do you *really* believe that John McCain or anybody else *seriously* proposes to impose discipline on their masters?
So, suppose we know the Democrats are the bad guys, O.K. But does anyone here still believe that the Republicans are the “good guys”, fiscal conservatives, etc., dedicated to *this* sovereign nation and no other?
The Republicans generally speaking don’t deserve the benefit of the doubt that your headline would promote.

I know you’re not naive or ignorant, so why the headline that misleads so many? Winning the election at any cost because the other guys are worse? My dear fellow patriots: we have lost. Our institutions are now so corrupt that I think our democratic processes offer nothing but an ever tightening enslavement. That’s what your loyalty to one of these parties is getting you.

They are rushing like mad to cram this Mother of All Bailouts down our throats in the next 72-96 hours. And right there in the text of the proposal is this naked power grab: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

One more comment please.
Your thread is about one specific matter, and I don’t want to spam that, but your headline implies something more, and I’m replying to that.

Again, I object to the implication in your headine that the Republicans are looking out for us. Where are the Republicans screaming bloody murder from the rooftops about this:
[from the Washington Post, June 24, 2005, (Kelo decision)]:
The Supreme Court ruled yesterday that local governments may force property owners to sell out and make way for private economic development when officials decide it would benefit the public, even if the property is not blighted and the new project’s success is not guaranteed.
Bush administration friends of the court briefs were on the wrong side of both Kelo and Heller. Was it V.Fox (the president’s good friend) who bragged that they would undermine the dollar to such an extent that we would beg for the amero? Prophecy, or inside information about what’s coming? How many jihadis walked across the border this year?
Are you really going to vote for Trotsky because he’s better than Stalin?

The implication in your headline, that the Republicans are looking out for us in these matters, is nonsense.
End. Thank you.

Republicans ran the whole show for years and did nothing on this particular subject. They “sought oversight” but obviously didn’t seek it hard enough.

If Prez. Bush couldn’t get the job done with an all Republican congress and judiciary how is “the reformer” going to get it done? even if he gets his all Rep congress back?

Now both parties are going to vote in this massive new bailout, even after propping up the important pillars of the economy (the neccessary bailouts), coz they know if they dont that the ensuing “market adjustment” just might be followed by a “political adjustment” in terms of who gets money for campaigns and who people will vote for.

The really funny part is that the guys who made their money and got out before the bottom fell out are going to get a tax break on all the money they made in order to “keep the economy growing”. Which eventually-to-be-bailed-out-by-taxpayers Ponzi scheme do you think those guys will stick all their untaxed “grow the economy” money into next?

Yes, after the emphasis on renewed drilling by the GOP jaw-boned the price of oil down to around $106/bbl, today saw a $23/bbl spike due to the dallying and obstructionism of the Dems on Capitol Hill.
Way to go, Nan!

Do you *really* believe that John McCain or anybody else *seriously* proposes to impose discipline on their masters?

If John McCain has a master, it’s news to a lot of people. I’ve pulled my hair out a few times at his choices (immigration, campaign finance, torture) but I’ve yet to see his “master.” You are starting to sound like DNC talking points, or, horrors, a Paulista.

Tell me, did the WTC collapse look like an inside job ? Come on, you can tell me.

During the Cold War, I was sure that the Democrats were the bad guys, and it was inexplicable that they could be so (evidently) pro-Soviet at a time when, I thought, we were fighting for ideological survival, at tremendous cost financially and psychologically. So naturally, I sided with the Republicans, and this went on for some decades. But following the collapse of the Soviet Union, our nation lost a great deal of what was in hindsight a forced cohesion. Also, much of the justification that the Republicans had used in many areas was removed. Gradually, because of issues like the federal deficit, the trade deficit, de-industrialization, open borders, etc., I was faced with the inexplicability of Republican behavior, too. The end of the Cold War should have ushered in a golden age for America, but instead, we raced toward self-destruction.

Well, faced with the inexplicable, confronted by paradox, I had to reexamine my assumptions about the Republicans, and about our government. I conclude, after a great deal of agonizing over this, that either they, themselves, are ideologues (some sort of Marxists) for whom the destruction of America is a stage on the road to building their utopia (call it what you will), or more probably, other groups weild the real money, and thus the real power, in the world, and these figures we see are just loathsome mediocrities in it for the payoff. When I said “masters”, above, I was revealing that I don’t believe McCain is an ideologue…
The interests who ran us uncountable trillions of dollars into debt, and all of their allies in government, will retire wealthy. I did not try to identify them, but “masters” is as good a name as any.

“Your thread is about one specific matter, and I don’t want to spam that, but your headline implies something more, and I’m replying to that.”

RC – The headline was self-explanatory and did indeed only refer to one specific matter. You simply souldn’t resist your urge to spam this thread with your comments #37 and #42. Anyone who took the time to read them is more stupid for having done so.

[An aside, then back to the specific topic: The headline promotes the theme, ubiquitous throughout our civic discourse, of “R good, D bad” (or visa versa). I think that is a good cop/bad cop jerk-around (not by our host, but by whoever is running the show), and I gave my reasons. This is easy to understand: one unelected guy says “gimme a trillion” and the other bends over and says “where do I sign?” Which one of these is the boss? If that is so, why do we bother with elections? Answer: they are civic theater engineered to keep the masses believing in our civic myth, because it is profitable to them to preserve that for now.]
Back to the specific topic: Under the cover of a divided majority, or when in the minority, any senator can claim to support anything he thinks would make him look good to his constituents. If we trust their good will, we might believe that they really desired what they claim. But I argued above that they no longer merit this trust, rendering the implication of the headline nonsensical. For example: the Republicans said they wanted a certain agenda. We believed that and gave them the majority. What we got was- stabbed in the back. This same argument applies to the Democrats, who have done nothing since assuming the majority, despite all of those outrageous promises they made to their base, designed to terrify us.
So, they don’t deserve that trust, that they really wanted that thing they couldn’t get, making the headline misleading in my opinion. It promotes an undeserved benefit of the doubt.

I have one general comment and that is that this is one act of a thousand acts or 10,000 acts which are relevant. Given John McCain’s propensity to endorse both sides of the same issue (don’t drill off the coasts, drill baby drill; don’t regulate, regulate baby regulate), we can hardly be surprised to find a quote supporting anything that needs to be supported.

More generally, I focused on the quotes, instead of the surrounding editorial comments, which, if you aren’t reading carefully, might look like quotes. I was struck by the following, among other things:

“The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios (New York Times, September 11, 2003).”

What really hits me about this quote is that the Bush Administration was trying to take a power away from the Congress. Given that the Executive Branch has seized many powers with B.S. rationales (e.g., the power to wage war in Iraq) that should be with the Legislative Branch, I can see why the Legislative Branch would have been very hesitant to relinquish any of it’s powers, duties, responsibilities. So, I don’t find the fact that this power was not turned over very enlightening as to the cause of this crisis. In fact, I am glad they did not turn it over. They should have retained the power, but they should have exercised their responsibilities. Notice that this was a wholly Republican Senate and Legislature and Presidency in 2003, when these problems were noted and nothing was done.

What is interesting is that at least some people recognized that there were serious problems and nothing was done about it, irrespective of which side of the aisle was complaining about these issues. Before reading this, I had thought that we had needed a whistle-blower on the inside of the system to shed light and truth earlier on. Apparently, the problems were obvious and anticipated.

This leads me to the following reflection, stimulated by hearing Bill O’Reilly (of all people) on GMA this morning. He said that if we don’t start electing the more honest candidates, we are never going to solve any of these problems, or words to that effect. To me, this goes to the heart of the matter. If we continue to be willing to vote for people we know to be liars, we are continuing to vote for dishonest government.

For me, McCain is one of the biggest disappointments ever. He has lied so much that even Karl Rove called him out on lying. Half a dozen Republican pundits have thrown him under the bus for lying. Sarah Palin is the most corrupt politician for whom I have ever had the chance to vote, with the possible exception of Nixon.

The primary reason I opposed Hillary Clinton so vehemently was that I believed she was a liar. I agree with Bill O’Reilly for once. We have to seek to elect those with fundamental integrity. We aren’t going to find perfection, but we can do a lot better than Bush, Cheney, McCain, and Palin.

Obama may be wrong sometimes. And, I do believe he is too close to the banking executives and that is something that has come to my attention of late. He’s not as progressive in many ways as he should be — and I’m not talking about socialistic. However, I have yet to learn that he outright lied to me. As a politician, I believe his level of personal integrity is one of his glowing strong points. If you can prove to me that he is a liar, I’ll stay home or vote for Ron Paul, who at least isn’t lying to me every morning, as McCain and Palin surely are.

I saw an article making the same point as this one on Fox & Friends today – its bullsh1t!

Although the commitee vote killing Freddie reform is regrettable in hindsight, I know from personal experience that this was not the root cause of the problem.

I was offered a mortgage in 2002 for a four two and a half in Coral Springs, Florida with no proof of income required. This was nothing to do with Freddie or Fanny. I turned it down because it seemed too risky, but obviously many, many others didn’t when made similar offers. This relaxation of the mortgage approval process caused the housing bubble. Suddenly anyone could get a mortgage, prices rose and flippers entered the market place, thus inflating the market even more and causing positive feedback on house prices. People only needed to pay the mortgage for a few months before flipping the property and moving on. When this bubble burst and people could no longer flip, and their temporarily low interest rate period ended, they were forced to foreclose.

So what caused the mortgage approval process to relax in the first place? Could it be deregulation of the mortgage industry? Who was responsible for that?

Didn’t Freddie Mac have to pay a $3.8M fine for illegal campaign contributions, and conducted numerous fundraisers, primarily for Republicans, and primarily for Oxley? It also appears that HUD allowed Freddie and Fannie to buy more than $480 billion in sub-prime mortgage backed securities from 2004-06.. I don’t understand how we blame Barney Frank when these things happened with a Republican Congressional majority and a Republican White House. Until the Republican party of today, which is nothing like my father’s Republican party, can accept responsibility, it is going nowhere.

So what caused the mortgage approval process to relax in the first place? Could it be deregulation of the mortgage industry? Who was responsible for that?

Comment by adso

No, it was the willingness of Fannie-Freddie to buy those mortgages as “conforming loans.” Had they not relaxed their standards as part of the whole CRA press for “affordable housing,” the lenders who originated those bad loans would have been stuck with servicjng them. Given that it was their own money at risk, those loans would not have been made. What happened was that it was OUR money at risk, as we see, and the loans were flipped along the path to Fannie-Freddie.

Unfortunately, we have a population that was educated in post-1960s public schools so that fact will never penetrate. In brief, and in the format most easily understood by the post-1960s educated, see this.